I’ve been self-employed for four years now, and in the last two years, my blog and my freelance work has been my sole income. I absolutely love the flexibility of it, being able to work when I want to work and to be (generally) in control of how much I earn. However, because it is never a guaranteed income, some careful financial planning and management are absolutely necessary.
Save, save, save
This can be easier said than done. Everyone ‘should’ save, but it’s particularly hard when you have no idea what is coming in on a month by month basis. At the beginning of every financial year, I look at the previous year’s earnings, concentrating particularly on the lowest earning months. From that, I set myself a wage – anything more than that goes into savings, so if I have a poor month, or an emergency comes up, we’ve got something to fall back on.
Don’t bank on the money
This is so important. At the moment, I have a decent freelance contract, with no end in sight. However, one day it will end, and that income has gone. It’s really important not to fall complacent and rely on that money. That leads on to my next point.
Have multiple income streams
At the moment, the vast majority of my income comes from one source – my main freelance job. However, I also have other, smaller freelance contracts on the go, and I also make a decent income from my blog – sponsored posts, affiliate links, and advertising. On top of that, I’ve just set up a second business for my photography. If – when – the main work runs out, I’ll have other things to fall back on to bring in an income.
Don’t use credit cards or take out loans for everyday purchases
Credit cards and loans can be a bad idea, even if you have a regular, stable income. You’re spending money that you don’t have. If you lose a big contract, or you can’t work for any reason, you’re stuck with a debt that you may struggle to pay off.
Plan for the future
This is one I really struggle with. We don’t own our house, so we can’t rely on using it when we hit old age. Sunlife has some information about this if you do own your home. This is why saving, and ensuring you put money into a decent pension is so important, especially if you rent. You need to be able to show prospective landlords that you can afford a property, even when you’ve retired or have decided to wind down.
Budget for taxes
When you’re employed, your taxes are taken out of your wages before you get it, so you don’t have to think about it. However, when you’re self-employed, you’re in charge of sorting your own taxes (and national insurance), the last thing you want is a huge tax bill to hit you by surprise. Put a percentage of your earnings away and don’t touch them, so when it comes to that time of the year, you’re ready with the money.
*In collaboration with Sunlife